Kodak buys into digital printing

With a pair of acquisitions, the photography icon hopes to cash in on growth in commercial printing. But per-share payback won't come soon.
Written by Dinesh C. Sharma, Contributor
Continuing its foray into the digital printing market, Eastman Kodak on Monday announced the acquisition of two digital printing businesses from Heidelberger Druckmaschinen.

Kodak said it will acquire the German company's share in NexPress Solutions, a 50-50 joint venture between Kodak and Heidelberg, along with Heidelberg's separate NexPress subsidiary. It also plans to take over Heidelberg Digital, a maker of black-and-white printing systems. NexPress is a supplier of on-demand color-printing systems.

The acquisitions are part of Kodak's plan to expand into commercial digital printing, moving away from its film businesses. Earlier this year, for instance, the photography icon completed its acquisition of Scitex Digital Printing, which deals with high-speed inkjet printing.

"Through the purchase, Kodak intends to increase its share in the US$17 billion digital commercial printing market," Antonio Perez, CEO of Kodak, said in a statement. "The move strategically positions Kodak in the market for digital production color printing, which is growing at double-digit rates."

Kodak says it won't make any cash payment when the deal closes. Instead, if all sales goals are met by Dec. 31, 2005, Kodak will pay up to US$150 million to the German company. Meeting sales goals will also be a factor in additional payments over a span of five years.

The acquisitions are likely to boost Kodak's revenue marginally by about US$175 million during the remainder of 2004, the company said. But operational earnings will take a hit--Kodak dropped its full-year outlook from a range of US$2.25 to US$2.55 per share to US$2.05 to US$2.35. The company anticipates that the acquired operations will add to earnings by 2007.

The two businesses being acquired employ about 2,000 workers, and their combined headquarters will be located at Heidelberg Digital's facilities in Rochester, N.Y., where Kodak also is based. NexPress CEO Venkat Purushotham will head the combined operations.

The agreement is subject to regulatory approval but does not need shareholder approval. Kodak expects to close the deal in May.

Editorial standards